The Chutzpah Caucus, by Paul Krugman, Commentary, NY Times: At this point the economic case for austerity ... has collapsed. ... Yet calls for a reversal of the destructive turn toward austerity are still having a hard time getting through. Partly that reflects ... widespread, deep-seated cynicism about the ability of democratic governments, once engaged in stimulus, to change course in the future.
So now seems like a good time to point out that this cynicism, which sounds realistic and worldly-wise, is actually sheer fantasy. Ending stimulus has never been a problem — in fact, the historical record shows that it almost always ends too soon. ...
Still, even if you don’t believe that stimulus is forever, Keynesian economics says not just that you should run deficits in bad times, but that you should pay down debt in good times. And it’s silly to imagine that this will happen, right?
Wrong. The key measure you want to look at is the ratio of debt to G.D.P... And if you look at United States history since World War II, you find that of the 10 presidents who preceded Barack Obama, seven left office with a debt ratio lower than when they came in. Who were the three exceptions? Ronald Reagan and the two George Bushes. So debt increases that didn’t arise either from war or from extraordinary financial crisis are entirely associated with hard-line conservative governments.
And there’s a reason for that association: U.S. conservatives have long followed a strategy of “starving the beast,” slashing taxes so as to deprive the government of the revenue it needs to pay for popular programs.
The funny thing is that right now these same hard-line conservatives declare that we must not run deficits in times of economic crisis. Why? Because, they say, politicians won’t do the right thing and pay down the debt in good times. And who are these irresponsible politicians they’re talking about? Why, themselves.
To me, it sounds like a fiscal version of the classic definition of chutzpah — namely, killing your parents, then demanding sympathy because you’re an orphan. Here we have conservatives telling us that we must tighten our belts despite mass unemployment, because otherwise future conservatives will keep running deficits once times improve.
Put this way, of course, it sounds silly. But it isn’t; it’s tragic. The disastrous turn toward austerity has destroyed millions of jobs and ruined many lives. And it’s time for a U-turn.